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Sensex Trades Marginally Higher; Pharma Stocks Among Top Gainers
Tue, 22 Aug 01:30 pm

After opening the day in green, share markets in India witnessed choppy trades and are presently trading marginally above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the energy sector and the healthcare sector witnessing maximum buying interest. Stocks in the realty sector and the power sector are trading in the red.

The BSE Sensex is trading up by 80 points (up 0.3%) and the NSE Nifty is trading up 30 points (up 0.3%). Meanwhile, the BSE Mid Cap index is trading lower by 0.1%, while the BSE Small Cap index is trading down by 0.2%. The rupee is trading at 64.11 to the US$.

In news from the oil and gas sector, Hindustan Petroleum Corp (HPCL) and ONGC share price are in focus today after ONGC's board gave 'in-principle' approval to acquire government's 51.1% stake in HPCL.

The government last month had approved the sale of its 51.1% stake in oil refiner HPCL to India's largest oil producer ONGC.

Prior to the merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals (MRPL) to bring all the refining assets of ONGC under one unit. ONGC currently owns 71.6% of MRPL, while HPCL has 16.9% stake in it.

ONGC will not have to make an open offer to minority shareholders of HPCL as the government's holding is being transferred to another state-run firm and the ownership isn't changing.

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Reportedly, the deal will be completed within a year and will see HPCL become a subsidiary of ONGC and remain a listed company post the acquisition.

To help achieve its fuel and energy goals, the government has been mulling over consolidating all the major oil players into an integrated public sector 'oil major'. Our energy sector analyst Richa Agarwal, had written about her view of this development in one of the recent editions of the 5 Minute WrapUp Premium. Give it a read to form a better understanding of the development.

HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries.

The deal is also likely to help the government achieve its divestment target. At current valuations, this deal would fetch the government more than Rs 300 billion, surpassing its strategic sale target for the year.

Centre Gets Cracking on Disinvestment

After three years of underachieving its disinvestment targets, the government is back with a bang. This time, it wants to focus on strategic stake sales of non-public sector units (PSUs) and areas where disinvestment has so far been poor. FY15-16 saw no disinvestment through this route.

For FY18, the total budgeted disinvestment target has been set at Rs 725 billion. Of this, Rs 465 billion is expected to come from minority stake sales, buybacks, mergers, public listings, and the CPSE ETFs. Rs 150 billion is likely to come from strategic sales. And the balance Rs 110 billion from listing of state-owned general insurance companies.

At the time of writing, ONGC share price was trading up by 1.4%, while HPCL share price was trading up by 3.2%.

Moving on to news from the pharma sector. Cadila Healthcare share price is in focus today.

Cadila Healthcare announced that it had received final ANDA (abbreviated new drug application) approval from the US Food and Drug Administration (USFDA) for its Pindolol Tablets.

Pindolol Tablets, will be manufactured at the company's formulation manufacturing facility in the Pharma SEZ in Ahmedabad. The drug is used to treat hypertension (high blood pressure).

Citing IMS Health sales data for the 12 months to June 2017, Pindolol tablets achieved annual sales of US$ 83.6 million.

The company's current portfolio consists of over 140 products authorised for distribution in the US marketplace and has so far filed over 300 abbreviated new drug applications (ANDAs) since it commenced filings in 2003-04.

At the time of writing, Cadila Healthcare share price was trading down by 1%.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

  • Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, Research Analyst, thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

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Please Note: The stock price of Yes Bank on NSE-50 is not adjusted for face value split. Kindly refer to its BSE's quote today for the adjusted price.

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